SAPS; UGANDA’S FAVOURITE BOGEY MAN

Picture this, you are in a world of hurt. Your income can not cover a month as the demands on that money –school fees, rent, fuel, food are just overwhelming. As if that is not enough, you lose your job. So, you go to your neighbour who is better off, for a loan.

Your neighbour would love to help, but more importantly he wants to get the money he lends you back, at some pre-determined point in the future. He is not a charity.

So, he sets some conditions for you if he is to lend you the money. Getting a job may not be easy, so most immediately he makes it a condition that you cut back on your lifestyle – move into a cheaper house, shift your kids to less expensive schools, cut out morning and evening tea and on some days you can eat two instead of one meal.

In the meantime, he wants you to look for a job. He may even be willing to pay your school fees to upgrade your qualifications. He wants to improve his chances of being paid back.

You have a choice to put pride aside, bite the bullet and accept the prescription in order to get the loan or tell your neighbour to go to hell and go and beg or con someone else who will lend you the with less onerous conditions.

Extrapolate this to the national level and these are the choices that faced the NRM and the Obote II before them.

"When the NRM came to power in 1986 not only were the national coffers bare, but also the economy had shrunk below its level fifteen years prior. In fact, it took almost 15 years from 1986 to grow the economy back to where it was in 1971...

After trying to get the economy back on its feet on our own resources failed, they turned to the World Bank and the International Monetary Fund (IMF) for help.

To access financing from these two Bretton Wood institutions they had to sign up to some conditions, which basically were to cut back on government spending and raise tax collections – Structural Adjustment Programs (SAPs).

This is not high finance, its commonsense.

Among the things government had to do was to shrink the size of government, sell loss making parastatals and liberalise the economy, let the private sector drive growth. In terms of raising taxes the Uganda Revenue Authority(URA) was created and invested more in infrastructure.

The measures to cut costs meant for starters, quite a few people lost their jobs a government was downsized and parastatals were sold off. Government struggled or cut budgets to things like university education and sports.

It is understandable why people were not happy with it.

"NRM tried to do it alone, thinking they could print money to climb out of the economic hole they found themselves, but this only made matters worse, with inflation hitting 250 percent a year...

To put that inflation rate in perspective it means prices were doubling every four months. That meant if you paid one million in school fees for your kids in January when you went back for second term it would be two million shillings and in third term would be four million shillings. we were here screaming when the price of petrol went up from sh4000 to sh5000 a 25 percent increment in a year, what would we be saying in 1987 when inflation was galloping out of control?

So when I hear people criticizing SAPs I think two things, either they were the beneficiaries of the economic chaos or they don’t know what they are talking about. I found that more times than not it is the latter rather than the former.

The main criticism of the SAPs was that it opened up our economies to the acquisition of our “assets” by foreign capital.

In Uganda’s case we are being very generous by classifying our parastatals as assets. An asset makes you money but these companies were a drain on the treasury, diverting money for more essential services to prop up under capitalised and badly run companies. People say if only government had recpaitalised the companies they would have been fine. When I hear this I don’t know whether to laugh or cry.

Government was so broke that it shut down Uganda airlines because it could not afford the sh10b (about $10m) a month it cost to keep it afloat. Today government would fill little pain with such payments.

If our “assets” were taken it was because of our own weakness. Kenya across the border from us did not have to let go of their state enterprises, because they were actually net positive contributors to the budget.

Now I hear President William Ruto is looking to flog them on the open market to raise money to clear some of the country’s huge debt. Common sense.

 

GOVT, KINYARA SWEETHEART DEAL SOURS INDUSTRIAL SUGAR SECTOR

 A deal to discourage importation of industrial sugar is set to make Kinyara Sugar Ltd windfall profits, as the only producer of industrial sugar, but has distorted the market leading to reduced production, job losses and increased imports of confectionaries.

Industrial sugar is used in the production of soft drinks, pharmaceuticals, icing sugar, sweets and other confectionaries. It is more highly processed, whiter and finer than the sugar we use domestically.

Kinyara started producing industrial sugar in 2021 and in that same year, government suspended a duty remission of 10 percent, industrial sugar users were allowed in the importation of the critical input.

Under the East African Common External Tariff (CET) goods, which are essential for production but unavailable in the region, are allowed 10 percent off the import duty -- duty remission, as a way to support industries that use it in production. A suspension on the duty remission means the importers would pay 100 percent of the import duty, forcing their costs up and maybe the price of their products up as well.

"Kinyara has an industrial sugar plant that has an installed capacity of 60,000 tons, though actual production has not exceeded 30,000 tons, way below the local demand of 98,000 tons....

The industrial sugar consumers have complained about the suspension of the duty remission as a way to force them to buy industrial sugar from Kinyara.

The government in two meetings held with the sector said local production of industrial sugar was to be supported and users would be “encouraged” to buy from local producers rather than import.

In a meeting convened at the finance ministry in March 2022 it was reported that the suspension of the duty remission was “sneaked in”.

“The importers of industrial sugar informed the meeting that they had made orders based on the gazette notice dated 30^th June2021 that run for the entire financial year ending 30^th June 2022. And therefore, their imported refined industrial sugar is currently stuck in bonded warehouses and factories are bound to close,” according to minutes from the meeting.

Under the terms of the suspension the importers had been given import quotas lasting until March 2022 and by the time of the meeting on 29^th March 2022,

“URA informed the meeting that the importers of industrial sugar had exhausted their quantities under the duty remission quotas, as provided for under the amended gazette dated August 2, 2021,” according to the minutes which Business Vision saw.

But beyond the ambush, importers of industrial sugar questioned the quality of Kinyara’s product and complained that its supply was erratic at best.

Users complained that Kinyara’s in tests done by the Uganda National Bureau of Standards (UNBS) and Chemiphar had among other short comings shown that the sugar had a high moisture content unsuitable for making icing sugar and caused machine damage because of the existence of water insoluble matter.

One company complained in a November 2022 meeting, “Locally sourced white sugar has hard particles and causes damage to machinery”

Another company complained that “They are faced with challenge of limited supplies and this is because they require over 125MT a month, but Kinyara can only supply 60 metric tons per month.

“In addition, local sugar prices have increased from sh165,000 to sh240,000 (per 50kg bag wholesale).”

This situation will open the door to importation from regional confectioners who are still enjoying the duty remission denied Ugandan counterparts.

In response Kinyara admitted it cannot supply the whole market.  It reported that the demand for its sugar is mostly coverd by Coca cola, Pepsi and Riham “Who take up 90 percent of its production and are therefore given priority when orders are placed.”

However, sources familiar with the operations of the Coca Cola Beverages Uganda and Crown Bottling company – Pepsi, dismissed these claims as lies and said they had ever only got samples for testing.

“The quantities they refer to would only run the factory for 20 minutes and was not up to scratch in quality,” he said.

"Part of Kinyara’s inability to produce at full capacity is an industry wide shortage of cane caused by the unplanned licensing of millers by the trade ministry mainly in the Busoga region. While there has been an explosion in the number of millers there has not been an attendant increase in sugar cane production....

This situation has led to poaching of cane by millers from as far as Atiak in Busoga or in Bunyoro from Busoga. As a result the industry expected sugar production is not expected to meet the target of 600,000 tons in 2022.

Both companies have urged government to go slow on suspending the duty remission until after their parent companies have tested Kinyara’s sugar and given the green light to use it.

In both finance ministry meetings they in addition, said that they – Coca Cola Beverages and Crown, are locked into long term contracts with foreign suppliers that cannot be terminated without suffering penalties.

Following the end of quotas last March importers have had to lobby intensely to government to allow the duty remission continue until at least Kinyara can supply the market with better quality sugar and more consistent quantities.

But they complain that their imports can be frustrated and it takes more lobbying to have them released under the duty remission.

As if that is not enough industrial sugar users complain that Kinyara’s product is significantly pricier than the cost of landing industrial sugar here from traditional sources.

In November Uganda Manufacturers’ Association (UMA) pointed out to the finance ministry that “It has come to our attention that the international price for sugar is $533 per ton, price landed at Mombasa is $729 per ton interior freight cost is $74 per ton and EAC duty remission is 10% bringing the price of a ton of sugar at $883, (Ugx. 3.4 million). A ton of sugar from Kinyara as at 9^th November, 2022 was at Ugx 4.1 million (Ugx. 205,000 per 50 kg bag). Kinyara sugar is priced 17% higher than the rest of the region.”

 “While the global prices have generally been on a decline, Kinyara prices have taken an opposite trend rising with every different consignment ordered,” UMA complained.

 That was in November last week an industry player said, “We buy off the futures markets so we have already established the price for our next shipment in 3 month’s today… this can easily be around USD 550 per ton… so a guy from Bujenje Masindi selling his at USD 1,200 is having a laugh.”

 

"Industry players complain on the sidelines that this deal was intended to favour Kinyara and talk of other producers is a red herring...

 Industry players are adamant they are not against locally produced industrial sugar.

“You would be mad to forego a competitively priced locally produced product for an imported one. It does not make business sense. We are saying that let government consult industry players, let us know their plans and we work towards them together. This situation has been handled badly, unnecessarily,” an industry player told Business Vision.

 

 

COMMENT REGARDING KINYARA WHITE SUGAR PRODUCTION 

Kinyara white sugar refinery has an installed capacity of 60,000MT per annum. Plans to expand the refinery to produce 75,000MT per annum are underway expected to be operational by end of March 2023. This expansion brings the refined industrial sugar production capacity to 120,000 MT per annum which includes other producers like Mayuge Sugar and GM Sugar. 

After commissioning the first sugar refinery in the whole of East Africa in Q3 of 2021; in line with the Uganda Manufacturers Association (UMA) and Ministry of Finance, Kinyara Sugar embarked on obtaining the UNBS Certification in Q4 2021. The refined industrial sugar is therefore certified by UNBS and Kinyara follows all the international sugar production norms and standards. 

The available refined industrial sugar stocks are enough to supply the local market needs and no single product went off the shelf because of lack of sugar. As a matter of fact, the company has exported more refined industrial sugar than what has been sold locally so how can one claim that there isn’t sufficient capacity? 

It’s also worth noting that the existent import duty remission scheme is being abused by some industrial users who claim higher consumption than what they actually use and later divert the cheap imported white sugar into the retail market. This usually happens at a time when domestic sugar prices experience a temporary spike which presents an opportunity to import and sell to make profits. 

The quota scheme is being abused by the many importers who are exaggerating the quantities of sugar to sell in the retail market. Some of the importers who actually use the brown sugar are now importing refined industrial sugar as a substitute for the brown sugar especially when the sugar prices rise and this ends up in the retail market. Currently, only carbonated beverage companies make up 90% of the market for the refined industrial sugar. Other purported users over state their refined industrial sugar requirements and later divert it into the retail market. The abuse of the import duty remission scheme is affecting the export market for the light brown and brown sugar within the East African Community partner states hence causing a big challenge to the entire sugar industry and the related value chains. 

The concerns raised by EAC partner states are pertaining production of surplus sugar in Uganda yet the country still imports refined industrial sugar. It’s therefore important to put in place some measures that protect the local refined industrial sugar production in the country and stop the abuse of the import duty remission scheme.

 

 

 

 

 

 

OF SMALL, THE MOBILE PHONE AND THE ECONOMY

There was a celebration to be had. Everything – the cake, the drinks, the guestlist, were in place. The last call was to be to Small, a far from small lady, who operates out of Kumbuzi on Gayaza road, and delivers the most succulent roast goat, the one which easily falls easily of the bone and its juices so tasty that closing your eyes as you chew, is the natural reflex.

For the first time ever, Small could not be contacted. Her phone was off. Demand for her offerings are so high that a drive to Kumbuzi was imperative. She was there suffering a slow day because her phone was stolen only hours before.

After making the appropriate sounds an order was placed for her world beating goat ribs and some chicken. The bill? sh147,000. Sh147,000 money she would have missed on a slow Sunday.

But it also made me wonder how much money she makes when her systems, read her suppliers, grill and weather, are all on go.  But most especially her phone.

In 1999 Uganda’s GDP growth jumped to 8.1 percent from 4.9 percent the previous year.

There had been no coffee boom, the donors were a bit pissed with us for going back into the Democratic Republic of Congo (DRC) and had withheld aid, 1998 was the year of El Nino, the freak weather pattern which manifested as uncharacteristic heavy rains, so harvests were affected.

"But in the previous year South African telecom MTN entered the market and in 1999 we were the first country in Africa in which mobile phone connections exceeded land line connections. Which was not saying much, as at the time there were 50,000 land line connections ...

I like the to think MTN’s huge investment in trying to stretch their reach around the country, had some thing to do with it but more importantly it is the greater efficiencies to business that came with this new connectivity that made a major difference.

Small is anecdotal proof in the 21^st century how connectivity is helping business. In 1999 this must have been nothing short of revolutionary. Traders no longer needed to guess at the availability of supplies and prices; meetings could be called or cancelled with a phone call; you did not have to chained to your desk phone to stay in touch.

They may look like small things, but they add up when they were spread over 100,000 new phone users.

Of course, since that mobile phone has increased phone coverage is now national, about 70 percent of the population now have access, but in addition we are now also connected to the internet via our phones, and can now send, save and borrow money using our phones. Each additional capability is increasing business efficiency and opening up new business avenues.

"A few weeks ago I asked at one restaurant, part of our largest chain, how much of their business is done physically against their delivery service option. Off the top of his head the manager said 60 percent of their business is delivery. That was mind boggling because the popularity of this restaurant is such most time seating space is at a premium, which ever day you visit....

He went further to describe one time he was at Kigungu landing site in Entebbe, kilometers away from the nearest branch and was shocked to see their delivery bikes there, delivering nojitos.

The efficiency of the telecoms system cannot be overemphasized (thanks god the government company no longer enjoys a monopoly). It is so important that a breakdown can become a national issue.

I remember about a decade ago I was in Nairobi and telecom operator Safaricom’s mobile money service went down for a few hours, the uproar was such that the management of the company were called in by government to explain how this could happen.

Small’s experience last weekend reminded me how critical an efficient telecom service is to the continued growth of the economy. But also, as a tool for reducing the inequality of opportunities in the economy.

"Access to opportunity is a function of there being opportunities to begin with and good infrastructure for entrepreneurs to take advantage of those opportunities. In badly serviced economies it is an infinitely small percentage of the population who have access to opportunities. Good, efficient telecommunications can even paper over other infrastructural deficits, like bad roads.

In the twenty first century governments have to walk a tight rope between expanding access to mobile phones and throttling this with unnecessary taxes and arbitrary regulation.

As if the point needs overemphasising, one boda guy after his phone suffered the same fate as Small’s, got a new line, filled his tank and rode around to wall his clients informing them of his new number.

 

THE NSSF PROBE AND THE LUBOWA PROJECT

As an interested observer of National Social Security Fund (NSSF), having been a saver since the 1990s, I have been following the Fund’s probe quite closely.

I was waiting for jaw dropping revelations and headshaking moments. I am still waiting. Maybe because I have heard worse in the past from NSSF and everything I hear in this probe pales in comparison.

I heard about squabbling unionists, some benefits accessed before they were due, Workers’ House encumbered title, difference in opinion between the seller and the buyer about land off the Entebbe Expressway and a host of other administrative issues, which truth be told, did not need parliament’s intervention. The real action was about meetings outside official hours and places, billions requested by the gender minister from NSSF and not the consolidated fund, which made me think the wrong people are in the dock...

But what really got me going was the suggestion that NSSF’s real estate investments were strange and  the membership did not have first call on them.

Real estate development has been the waterloo of many NSSF CEOs before. The development of Workers House put paid to the tenure of Abel Katembwe; the development of Nsimbe Estate cost Ronald Mpiima the top job and at the heart of David Jamwa’s dismissal was issues surrounding the development of Temangalo. Real Estate is messy business for NSSF’s bosses.

So when questions were raised about Lubowa estate I paid attention. The net concern about Lubowa estate development was that the houses were priced out of many NSSF members’ reach.

Last year president Yoweri Museveni launched the sale of the  Solana Lifestyle Residences at which the entry price for the phase launched was about $150,000 (sh570m). At the time NSSF management explained that the cost of laying down infrastructure – roads, electricity, water& sewerage, were such that it was hard to push the price lower.

During the probe some people seemed to suggest that the NSSF should have built less grander houses in order to bring the price down to managable levels for the average NSSF member.

"From a purely statistical standpoint the average saver in NSSF is good for about sh13m – I took the full asset base of sh17trillion and divided it by the 1.3m members. What does a house that a sh13m man look like?

Lubowa situated between Entebbe Road and Entebbe Expressway is a prime property. In order to maximise its return, it requires that development be tailored towards a higher tier of the society.

Patrick Bitature, a man who knows something about real estate development, suggests that to derive optimal value from commercial real estate you need to invest at least ten times the value of the land, the market allowing.

Going by this rough rule of thumb the 600 acre Lubowa development, which had a book value of sh305b in June 2020 would require at least a sh3trillion investment to make sense.

Not to overstate the obvious, simple arithmetic would indicate that that would be sh5b invested per acre.

Put another way, you would not build a bungalow on Kampala Road, if you are to maximise your piece of land’s earning potential.

That being said NSSF is in advanced stages of completing the first phase at the Temangalo development, 17 km outside Kampala, which houses will be more price friendly – starting at sh90m.

The point is that you cannot criticize a project based on your pain point.

That being said NSSF’s main mandate is to ensure social security for its members when they are out of work. This entails that it keeps the savings they contribute and provide an adequate return that will ensure, at the bare minimum, the value of their savings are not eroded by inflation.

"We judge NSSF on what we will get when our working days are over  first. Other things like its asset allocation are secondary to us the members...

But because of its size NSSF also feels a greater responsibility to society. In its investment it also seeks to have a transformative effective on the environment it invests in. So it would be a disservice to the wider society to under invest in Lubowa to accommodate its members.

I know most people are biased towards fixed asset investment; they would rather have NSSF more involved directly in the real estate development. I don’t share the sentiment because there are better returns elsewhere than in real estate. But I can understand that NSSF, with its sh17trillion war chest is an anomaly in our dysfunctional society that cannot be left alone.

To he who is given much, much is expected of him.

 

BOOK REVIEW: BEYOND ENTREPRENEURSHIP 2.0

Author Jim Collins is always a joy to read. Whether he is unlocking the secrets of how great companies climb above their peers in "Good to Great" or why some companies endure for generations and others don't in "Built to last" or why companies implode  and collapse in "How the mighty fall" and why some companies survive and even thrive among the chaos of constant change and others fail in "Great by Choice".

"Beyond 2.0" is his latest book but also h is oldest book, in that its a reboot of his earliest book co-authored with fellow Stanford University don Bill Lazier.

It is probably his best book yet and most relevant for the majority of businessmen, because it speaks to how to build a company from the ground up. His previous offerings have often analysed the multibillion dollar corporations that populate the Fortune 500, which while pointing out universal lessons for business, dabbled in the rarefied atmosphere of success that nine in ten businesses will never attain live alone dream about.

But it is also  his best because he brings the lessons from his other best sellers to bear on his first book, also called 'Beyond Entrepreneurship" published in 1992. So between its covers it has the audacity of youth and wisdom of hindsight.

So you want to start a business and your initial preoccupations are with raising capital, finding premises and attraction customers, even hiring decisions are far away down the line. The book deals with none of the above, but instead emphasises the often ignored, forgotten or ignorance of the soft skills needed to improve a company's success and eventual longevity.

Collins counsels that in our businesses we should place more emphasis on people, leadership style, vision, strategy, innovation and tactical excellence.

When you are a businessman in the thick of things, trying to survive let alone thrive, these softer issues seem like something for somebody else, no wonder you will not last five years.

There were many lessons in this book --- I underlined almost 250 of them, but these are my five lessons, in no order of preference.

1. The only way to build an enduring great company that makes great products is to have the right people working in the right culture.

He says to be a good leader is a choice and not bestowed upon you by your title or by genetics. Leadership is key because it determines the culture of companies and enterprises. Culture is what is allowed and comes from mimicking what the leader does. Culture flows from the top to the bottom and never the other way around.

This is important because good people will work where the culture allows them to thrive and fulfill their potential. And also because great companies are made by good people more than good ideas.

Related to leadership Collins believes the key metric businesses should be measuring -- not profit margins or ROIs or ROEs but "the percentage of key seats on the bus filled with the right people".

2. The number one responsibility of a leader is to catalyse a clear and shared vision for the company and to secure commitment to and vigorous pursuit of that vision.

What do most of us do, we just jump in start selling. The vision sets a destination, the bigger the vision committed to  the better the chance of long term success.

Of course most businesspeople even of the most lauded companies did not get around to articulating their vision until years into the business but Collins argues that once this is done and shared a major inflection point was reached.

But even more important is sharing it and having universal commitment to it. Everybody must know his part in making the vision come to fruition, as a way to ensuring that the company will live beyond the founder.

3. Don't grow too fast. You need to grow slow enough to develop good management. If you push too fast you lose your values.

Once a company fails to live to its values, which underpin its vision, strategy and culture, success is not assured. if for no thing else rapid expansion should be discouraged.

The temptation for rapid expansion is always there when opportunities present themselves or you are flush with cash. But speed kills or at least makes holding everything together all the more difficult.

4. The real challenge isn't how to be creative but how to become self-disciplined while keeping vibrant the full force of your natural creativity

To be an innovative company is critical to survival to success. The temptation for the autocrats and the micromanagers is to stifle rather than enable creativity and innovation. But the key to keeping the creatives on message is to ensure they know and appreciate the company vision and then let them run.

5.The last lesson I will let Collins say in his own words

"Good people attract good people, who, in turn attract more good people and so on .... The primary assessment of good should be "Does this person for with our values? Is this person willing to buy into what we're all about? Is this person likely to live with our precepts?"

Which brings us full circle... You cannot build a great company without good people; you cannot have good people if you are not clear about your values and culture; you can not be clear about your values and culture if you are not clear about strategy; and you can not be clear about strategy if you are not clear about the vision for your company.

First vision then strategy then tactics.

An all around good read for anyone going into business or planning to build an impactful enterprise in any endeavor.

UGANDA SUGAR GETTING A BITTER TASTE

When history is written the NRM (National Resistance Movement) will be credited with resuscitating the sugar industry and then killing it.

For the first time in almost 10 years sugar production fell in 2022 on account of falling sugar cane production and a concentration of a sugar mills in the Busoga region, which has triggered unfair and unsustainable competition.

This has led to jump in sugar prices and jeopardising of a recently won sugar market in Kenya.

When the NRM came to power in 1986, years of neglect from the 1970s led to the collapse of the sugar industry – factories fell into disrepair and fields were abandoned.

The NRM helped the three major players Kakira Sugar Works, Sugar corporation of Uganda Ltd (SCOUL) in Lugazi and Kinyara Sugar ltd in Bunyoro, to get back on their feet. Over nearly three decades the three rehabilitated and expanded their plants and use of sugar cane out growers to the point that by 2014 total production had grown to 438,000 tons enough to meet local market demands of about 350,000 tons and a surplus to export to the region, especially Kenya where there own sugar industry had collapsed....

In addition, the industry was directly employing 20,000 workers and many thousands more indirectly up and down the value chain.

The year 2014 is important because it’s from around that time that new sugar mills licensed irregularly by the trade ministry begun production and started a boom-and-bust cycle in the industry that threatens the gains of the existing investors and a future collapse of the industry.

“The trade ministry aided by some local politicians in Busoga  pushed for the licensing of these new mills, without insisting they have their own nucleus fields, which means they started stealing cane from the existing outgrowers who were licensed to Kakira and Lugazi,” an industry player told Business Vision.

The major investment in the sugar industry is not the plant and machinery but the development of the plantation and setting up outgrower schemes. The new players sought to short circuit the process by setting up plants and hoping to poach cane from the existing players.

The business model has been that the millers have a nucleus estate – Kakira has about 23,000 acres and has developed an additional 15,000 acres in Kayunga for a total of 38,000 acres, SCOUL has about 30,000 acres and then develop an outgrower network, which is often multiples of the neucleus estate and supports thousands of farmers.

“Politicians complained that out growers were being paid peanuts for their cane but they did not factor in the inputs the big millers had put in –- ferterliser, pesticides, research, extension services, transport and even some loans to tide the farmers over the periods where they had no cash. All these costs came off the price of cane delivered to the factory,” the industry source.

 Farmers excited by the new dynamic increased sugar cane production – with production jumping from 334,000 tons in 2013 to 438,000 tons. But supply and demand factors came into play and the once lucrative prices they were getting for their cane fell leading to a plummeting of production to 344,000 tons in 2017. With low supplies prices went up again and the industry recovered with production jumping to 622,243 tons in 2021.

With increased production prices went down to sh90,000 at the beginning of 2022 but ended the year at sh220,000 a ton.

This is a result of two factors farmers having decided to ditch the crop when prices collapsed but also because immature cane has been harvested in previous years affecting current production.

"Sugar cane in our part of the world matures at 18 months, when the optimum sugar content is achieved. Harvesting before that time means you will need more cane to produce a unit of sugar, but also jeopardise future harvests....

The instability in the industry has far reaching ramifications for livelihoods in the sugar growing areas, future investments in the sector and may put paid to our future export plans.

As it is now there is more sugar milling capacity in Busoga and Buganda than there is sugar cane to crush, as a result most the millers are operating at less than half of their full capacity. Existing players have no incentive to invest more.

“The assistance farmers is reducing, Why should I support the farmer when I am not guaranteed of his cane on harvest?” the source said.

As a result farm yields have fallen around Busoga from about 120 tons of cane per hectare to half that amount. This means famers now need twice as much land to produce the same amount of sugar, which has far reaching consequences for food security in the area.

“When prices jump farmers forget about food production and commit more of heir land to sugar cane production. So as cane prices fall hunger can be a very real problem in the region.”

To add salt to injury there has been a proliferation of weigh bridges in the area. Weigh bridges have been set up by private individuals who can take possession of sugar cane and pay the farmers cash. Originally farmers used to deliver straight to the factory, where not only quantity but quality was checked.

“Now these illegal weighbridges are just checking for quantity. So immature cane is taken as well,” the source said.

The seduction to the farmer is obvious but even more so for the growing middlemen who operate between the farmer and the mills.

“Now the roads are lined with trucks loaded with cane and the traders phones are beeping all the time with price quotes from this miller or the other. When they get a price they like the send the trucks off to the miller,” a trader told Business Vision.

"As it is now cane prices are high making our sugar uncompetitive in the export market. That may not be a problem as a soon cane prices will crash again. But our export markets cannot wait....

“Kenya government has accorded permission to import 100,000 tons duty free sugar from India/Thailand for home consumption,” a senior industry official complained. “And once the importers get a foothold, we will go back to the Kenyans fighting our exports.”

Our export price was up to $957 per ton dramatically up from $648 earlier in the year.

And the solutions industry players say, are within reach.

For starters government needs to stop the licensing of millers in the Busoga region and all existing factories must develop a nucleus estate of at least 2500 acres; weigh bridges should be shut down and farmers deliver their cane directly to the factory and an advisory committee be set up as stipulated under the Sugar Act 2020, which will have the power to implement decisions within the legal framework immediately. Ian addition government should undertake a study and zone the sugar growing areas to allow for orderly expansion and proper development of the sector.

"The unplanned licensing of new millers by the trade ministry, without insisting they develop their own fields and cane supply chains, is leading invariably to the collapse of the sugar industry in Busoga. Ministry officials were unavailable to comment on the subject.

It has happened before. In the 1970s and 1980s Uganda sugar production supplied the region. The giant millers at Mumias and Chemilil  in western Kenya, both parastatals were brought to their knees through poor management and connivance with importers. The use of pirate millers was instrumental in bringing about that scenario.

“If we continue like this (licensing new millers) we will kill the industry and the suffering to the region is hard to calculate. These new players do not care about the regional or national economy, they just want to make money whether the industry survives or not,” the industry source said.